Wow. Will the jobs picture ever turn rosy? From Calculated Risk:
I hate this time of the month. The jobs figures come out and good or bad, you know immediately what the Democrats are going to say and how the Republicans will respond. But ZeroHedge has the most interesting take–so far. Not sure what to think of it, given my lack of experience and knowledge in the area of employment statistics. But according to ZeroHedge,
it appears that the people not in the labor force exploded by an unprecedented record 1.2 million. No, that’s not a typo: 1.2 million people dropped out of the labor force in one month! (emphasis in the original)
What to think?
Update: Barry Ritholtz says ZeroHedge doesn’t know what he’s talking about.
In October last year, Obama granted McDonald’s and 28 other firms waivers from having to comply with his Affordable Care Act. With that in mind, consider the following.
Prior to the release of the May jobs report, Morgan Stanley, according to MarketWatch, estimated that McDonald’s would account for roughly half the jobs created in May 2011.
Morgan Stanley estimates McDonald’s hiring will boost the overall number by 25,000 to 30,000. The Labor Department won’t detail an exact McDonald’s figure — they won’t identify any company they survey — but there will be data in the report to give a rough estimate.
In fact, total private-sector employment grew by 83,000 in May. Thus IF Morgan Stanley was right, Mickey D’s was responsible for as much as 36% of the private sector jobs created last week. (If you use the total non-farm payroll, which includes government jobs, job growth was even weaker at just 54,000; thus, Mickey D’s could have accounted for up to 55% of new jobs.)
In any case, job growth was weak in May, and McDonald’s probably created a large number of those jobs; thus, logic compels the following question: Should Obama grant waivers to all businesses?
The talking heads have had nothing good to say about Mitt Romney lately, and especially since his healthcare speech in Michigan last week. Are his backers not paying attention? What do they see that the talking heads don’t?
Standard & Poor’s just shot a big gun across the bow of our ship of state, warning of
a “material risk” the nation’s leaders will fail to deal with rising budget deficits and debt.
At least one player in the government bond market agrees:
“It’s truly a shot across the bow and a message to Washington, which has been clowning around on this and playing politics when they should toss ideology aside and focus on achievement,” said David Ader, head of government bond strategy at CRT Capital Group LLC in Stamford, Connecticut. “The bond market is still trying to find out what to make of it. People don’t know what to do. If you sell Treasuries, what do you go in to? No one knows.”
So what’s Treasury’s response?
Treasury Assistant Secretary Mary Miller said today that S&P’s outlook on the U.S. credit rating “underestimates” U.S. leadership.
“We believe S&P’s negative outlook underestimates the ability of America’s leaders to come together to address the difficult fiscal challenges facing the nation,” Miller [NKA Baghdad Bobbette] said in a statement. (emphasis supplied)
Our debt may becoming more expensive, but this response is priceless.
Barack Obama is back, and the press–in the person of Jonathan Alter–is carrying his water, again. In a column titled Republican Horror Movie Sequel Hits Theaters Alter breathlessly warns Republicans to
Be afraid. Be very afraid.
And why? Because of that speech BO gave last this week at George Washington University. You know, the one universally panned as not serious, awful, presidential politicking at its worst? Yeah, that one.
So why is Alter experiencing that special tingle? Well, for one, BO’ s a great story teller. I agree, but then I’m thinking of story in the sense that the man says whatever is to hand, whether it’s true or not. When his lips move, well, my antennae go up. I don’t think that’s what Alter meant.
The other think that’s ginned up the good columnist is that idea that
Most important, the president stressed the fundamental American values of fairness and compassion.
In other words, we’re back to Joe the Plumber talk–redistribution.
A highlight of Alter’s piece for me was his admission that Democrats are given to demagoguery. In taking his swipes at Rep. Paul Ryan’s budget plan, Alter writes,
Older, independent voters that Republicans won in 2010 will despise the Ryan plan once it filters down to them. A Democratic war cry of “They’re killing Medicare!” isn’t demagoguery this time. It’s true.
No, in fact it’s not true and Democratic talk like this continues to be demagoguery, especially given the fact that they refuse to offer a plan of their own with any specifics in it. Exactly how would they deal with Medicaid and Medicare, plans that Alter in one breathe says are “wildly popular” yet “must be reformed”?
As he admits, we’ll get no help from the Annointed One.
The president offered few specifics about how to save $4 trillion over 12 years beyond letting the tax cuts for wealthy expire in late 2012. That won’t be enough. But teeing up tax cuts for the rich as a campaign issue will clearly help the Democrats, as it did in 2008.
Yeah, that should scare Republicans. Drag out the hoary ghost of campaigns past, the “tax cuts for the wealthy” meme. If this is BO’s game, it brings to mind this game:
He’ll not win this time, not throwing like that. I’m not sure our fawning press will manage to carry that ball over the plate.
Gary Becker, George Schultz, and John Taylor have a plan to bust the budget. It’s worth reading. To me the most obvious gem in the plan, and the one most sorely missing in all the talk in Washington right now is this:
Assurance that the current tax system will remain in place—pending genuine reform in corporate and personal income taxes—will be an immediate stimulus.
Congress and the President (any Congress and any President) have used the tax code to implement policy choices. It’s time to leave the rules be, so that business can plan, something they are loathe to do when there’s no promise that the rules won’t change next week.
Due to malware problems, I didn’t post on the Fed’s most recent FOMC statement. Here it is. Nothing changed; that is, the federal funds target rate will remain in the 0 to 1/4 percent range, and the Fed will continue to purchase Treasuries pursuant to QEII. That said, there was this interesting snippet (emphasis mine):
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate remains elevated, and measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. The recent increases in the prices of energy and other commodities are currently putting upward pressure on inflation. The Committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations. The Committee continues to anticipate a gradual return to higher levels of resource utilization in a context of price stability.
What they’re talking about here is the Phillips Curve, which says that with low inflation comes high unemployment. Conversely, higher inflation brings lower unemployment.
In the present case, the FOMC doesn’t think the upward pressure on inflation will be lasting; thus, the committee anticipates that the employment picture will improve, but only gradually. And, it appears, that improvement will will not come because of an increase in the federal funds target rate–not anytime soon anyway.
The two key statments:
To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
All emphasis mine.